Fred Wilson has a spectacular post up on how VC funds should think about reserves. It’s even more valuable to entrepreneurs so they can understand how the best VCs think about reserves, giving the entrepreneurs ammunition to ask their investors how they are thinking about reserves.

“Fred – phenomenal. The only thing I noticed missing was a comment on fund cash flow. To recycle, you have to have the cash flow. If you don’t have the exits to generate funds to recycle, you can hit a cash flow wall where your reserve model breaks (since you don’t have the cash to fund the reserves.) There are several solutions to this, including recalling capital, having an annex fund, and suspending management fees, but the best is having the cash in the first place …”

In addition to the post being great, the comments have a lot of rich stuff in them as well.

Scott Belsky has a great post up titled Don’t Get Trampled: The Puzzle For “Unicorn” Employees. In it, he’s got a bunch of questions, along with detailed discussion, that you should ask your potential employer if you are considering a job at a unicorn (company with > $1b private valuation.) His suggestion is to strongly “audit your comp” in advance.

The questions include:

Have you raised capital with liquidation preferences, and what are they?

How many months of runway do you have?

If you need to raise more money but are unable to do so at standard terms, will you accept less favorable terms or will you raise at a lower valuation?

Has the company taken on debt?

Does the company aspire to be a public company?

If the company’s plan is to stay private for the foreseeable future, have there been secondary sales for employees and/or founders?

The punch line – it’s the transitive property that we learned about in elementary school math:

So how do you get funded? Step one — get an introduction. Find someone you know who can introduce you to the person you want to pitch. The closer your relationship with the person making the introduction, the better. And the closer that person’s relationship with the VC the better. I’ve written about this before and described it as “borrowed credibility.” If you are being introduced by someone who has credibility with the VC, and you have credibility with the person making the introduction, you will have credibility with the VC.

I learned about this in elementary school math class — it is called the transitive property:

if

A has credibility with B

and

B has credibility with C

then

A has credibility with C

And as a corollary to the traditional transitive property, (1) the stronger the credibility between A and B, and (2) the stronger the credibility between B and C, (3) the stronger the credibility between A and C.

Reid Hoffman, founder / executive chairman of LinkedIn and partner at Greylock has started blogging. Well – he’s started writing long form essays on a blog that my understanding is will come out about once a month.

The first post is If, Why, and How Founders Should Hire a “Professional” CEO. It is outstanding and I expect Reid’s blog should be on your must read list. My only complaint is there are no comments open – I’d encourage Reid to engage with people reading this, rather than just lecture to us!